Two Investment Advisers Are Comparing Performance

question 13

Multiple Choice

Two investment advisers are comparing performance. Adviser A averaged a 20% return with a portfolio beta of 1.5, and adviser B averaged a 15% return with a portfolio beta of 1.2. If the T-bill rate was 5% and the market return during the period was 13%, which adviser was the better stock picker?

• A) Advisor A was better because he generated a larger alpha.
• B) Advisor B was better because she generated a larger alpha.
• C) Advisor A was better because he generated a higher return.
• D) Advisor B was better because she achieved a good return with a lower beta.

---

Definitions:

Stratum Corneum

The outermost layer of the epidermis, consisting of dead cells that form a tough, protective barrier.

Stratum Lucidum

A thin, clear layer of dead skin cells found in the epidermis of the palms and soles, contributing to the skin's barrier function.

Nail Matrix

The tissue under the nail that is responsible for producing cells that become the nail plate.

Lunula

The visible part of the root of a nail, often appearing as a whitish half-moon shape at the base of the fingernail or toenail.